Corporate Finance and Treasury Qualifying Activities

Managing corporate liquidity, financial risk management, managing foreign exchange

Managing Liquidity for Global Operations

  • Dealing in short-term securities with a non-resident person or broker
  • Managing a portfolio for a Canadian affiliate that consists of investments in securities issued by a non-resident and not listed on a Canadian exchange
  • Managing a portfolio of foreign or Canadian investments for a non-resident
  • Leasing property to a non-resident by means of a direct finance lease

Accounts Receivable (Factoring)

  • Collecting trade accounts receivable from non-residents, either affiliates or customers, for a non-resident
  • Accounts are receivable from a non-resident and purchased without recourse

Administrative Services

  • Administrative activities directly related to a financial activity of a non-resident

International Leasing

  • Leasing property, by means of a direct financing lease as defined in the Canadian Institute of Chartered Accountants Handbook

Financial Advice and Research

  • Providing financial advice to a non-resident (this excludes legal, accounting or tax advice provided by a corporation in the business of providing that advice)
  • Preparing financial research for a non-resident (this excludes legal, accounting or tax research provided by a corporation in the business of providing that research)

Financial Risk Management

  • Insuring or reinsuring prescribed risks related to non-resident persons or property situated outside Canada. Prescribed risks are those that fall within any class of insurance defined under the Insurance Act, except life, sickness or accident insurance. Captive insurance arrangements are eligible.

Case Study #1

  • A Parent Co sells its receivables to A Co (BC IBA Co) on a non-recourse basis.
  • A Co registers in the International Business Activity (IBA) program.
  • A Co carries on the business of collecting A Parent Co’s receivables. The income earned on collecting receivables from non-residents is eligible for a provincial tax refund. (In 2012, B.C.’s corporate tax rate is 10%.)

Illustration

Factoring Diagram

Analysis

  • A Co is eligible to apply for registration since it will be carrying on an “international business”.
  • A Co will be required to become a member of AdvantageBC in order to remain registered.
  • A Co’s business activities qualify as an international business because it is collecting trade accounts from non-resident persons which have been acquired on a non-recourse basis.

Case Study #2

  • A Co is incorporated in British Columbia with its sole office in British Columbia.
  • A Co is registered as an “international business” under the International Business Activity Act (IBAA)
  • A Co leases an asset to wholly-owned subsidiary, A US Co as a finance lease.
  • A US Co leases an asset to a third-party as an operating lease.

Illustration

Leasing

Analysis

  • The lease is a financing lease such that substantially all of the benefits and risks of ownership are with the lessee.
  • A Co is carrying on a qualifying business: leasing by means of a finance lease is a qualifying activity.
  • A Co is required to become a member of AdvantageBC Society in order to remain registered.
  • A Co is eligible to claim a refund of its BC corporate income taxes paid in respect of its international business. (In 2012, B.C.’s corporate tax rate is 10%.)

Did you know?

  • British Columbia is one of the top two designated financial centres in Canada.
  • BC has some of the lowest corporate taxes in North America.
  • You may be eligible for a refund of BC corporate tax on income from international business activities.
  • Vancouver is among the top-10 wealth management centres in the world.
  • The IBA Program includes a personal income tax incentive for international employees.